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Re: Perpetual Inventory Valuation in Continental Accounting

by
wipawiij@ecosoft.co.th
- 02/26/2016 22:42:39
Hello Quentin and All,

I have no idea what continental accounting is but what I want to share is.

Principle:

Inventory system = Perpetual and Periodic. This is how and when we recognise CoGS.
Costing method = Standard cost, average, FIFO, LIFO (as I know no longer LIFO in IFRS, no idea about US GAAP). This is how to calculate cost to record in above system.

Practice:

If we use Perpetual method there is possible to have price difference while if we use periodic, there is no price difference.

In my country,
  • when we receiving goods (Incoming shipment, there is no account move.)
  • when we receiving invoice, our entries are
    • Dr   Purchase     100
    •    Cr     Payable       100
  • At the end of period (month or year), we will do the physical count to get Real Quantity of Inventory balance and record it to Balance sheet, the different amount of Purchase and Ending inventory will be 'CoGS'.
    • Dr   Inventory       20
    • Dr   CoGS            80
    •     Cr    Purchase     100
I don't know if your incoming shipment has account move, how accounting entries are taken for double accounting concept if you don't use suspense account like GR not IR.

Dr   Inventory   100
   Cr    GR not IR   100

Dr   Gr not IR    100
   Cr    Payable      100

That is why Odoo has Anglo-Saxon, am I correct?

However, Odoo-Anglo-Saxon module (I agree with Jordi that no Anglo-Saxon or Continental accounting in any Accounting standard) is not complete for all case as Jonathan and Jordi said.
  • Exchange rate applied to CoGS
  • Landed Cost
  • even accounting entries for each costing method, I am still facing it is not correct. Is it possible that I don't know how to configure or set accounting?

With my 2 cents really.

Regards,

Wipawii
Phone: +66 (0) 2 105 6494
Mobile: +66 (0) 8 1341 5625
Your ERP partner => www.ecosoft.co.th

On 27 February 2016 at 09:37, Wipawii <wipawiij@ecosoft.co.th> wrote:

Hi Jordi,

Your reply is useful. Can I ask more here? It seems there will be a difference between shipping to Customer before and after receiving Supplier invoice. Do I misunderstand any points?

My entry there is no difference of entry but different cost, which depends on costing method.

Please suggest my entries below are correct or not.

With anglo-saxon

STD cost. Product cost = 10.

My all entries are the same as you described except when receiving supplier invoice. I record all dif to price dif account to keep product cost is the same as standard cost we set = 10

Dr.  GR not IR     100
Dr.  Price dif  10
  Cr.       AP     110

In case of Average cost. Now Product cost is 11 (1st receiving PO is 10 and 2nd is 12) and your example here is the 3rd receiving

Incoming shipment
Dr.  Inventory    105
   Cr.  GR not IR    105

Now Product cost = 10.6

Ship to Customer 10.6*3

Dr.  CoGS     31.8
   Cr.  Inventory    31.8

Receiving Supplier Invoice.

Dr.  GR not IR   105
Dr.  Price dif.        5
   Cr.  AP                    110

Is this wrong? To record all dif to price dif account, not charge and average it to product cost.

Please suggest.

Cheers,

Lek

www.ecosoft.co.th

Sent from my Android

On Feb 27, 2016 01:18, "Jordi Ballester Alomar" <jordi.ballester@eficent.com> wrote:
Quentin, easy as pie :)

In perpetual inventory valuation, under average and real costing methods.

Scenario:
Purchase Order: 
Product A: 
- Cost: $10
- Qty: 10

1.- Process Incoming Shipment to receive product. Books into inventory the value of the stockable product at PO price.
Dr. Inventory $100
Cr. Goods Received Not Invoiced $100

2.- 3 items are shipped to the customer before you receive the supplier invoice.
Cr. Inventory $30
Dr. COGS Deferral / COGS $30

2.- Receive supplier invoice
Product A:
- Cost: $11
- Qty: 10

Cr. Accounts Payable $110
Dr. Goods Received Not Invoiced $100
Dr. Inventory: $7
Dr. Price Difference: $3

Affectation to the inventory costing:
Average method: Standard price must be re-averaged. 
Real method: update quants in stock for this transaction adding the new extra cost of $11.

In standard costing the current Odoo's approach is fine. Everything is posted to Price Differences.

A similar thing occurs for exchange rate differences between PO and supplier invoice. But then you post to Exchange Rate differences instead of Price Differences.
Of course, it's usual that both exchange rate differences AND price differences occur at the same time, and then you have to post separately.

I'm coming to Brussels on the 8th of march, and would be happy to review with you.

Find attached a module that makes a slight modification to the current anglo-saxon module to post separately price differences and exchange rate differences. It's not covering the re-valuation, so it's not pixel perfect :)











On Fri, Feb 26, 2016 at 6:17 PM, Quentin De Paoli <qdp@odoo.com> wrote:

Hi community,

recently, a question arose from a customer request which I need to confront to your expertise.

Upon validation of a supplier invoice for a product in perpetual inventory valuation, do we have to have to book the difference between the PO price (inventory valuation price) and the supplier invoice price even if the company is doing continental accounting (no anglo-saxon mode)? If yes, what should be the accounting entries for the incoming shipment and supplier invoice?

Thanks in advance

--

Quentin De Paoli
LAN Parties Manager
Odoo (Formerly OpenERP)


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